H-E-B TO TEST WHETHER IN-STORE TACO CABANAS WILL BE HOT

JACK ROBERTIELLO

SAN ANTONIO -- In a test scheduled to begin in early 1997, H.E. Butt Grocery Co. here will incorporate units of a popular Tex-Mex restaurant into two expanded and remodeled stores.

The Taco Cabanas will be built inside the two renovated H-E-B stores, with seating for 40 customers, some exterior patio seating and a walk-up takeout window. The chain has arranged to lease space in two stores in San Antonio, home to both partners in the project.

The restaurants, part of a 124-unit food-service chain, will be approximately 1,400 square feet, and will be situated in the fourth corner of the H-E-B stores, placed near the exits and just after the cash registers, according to David Lloyd, chief financial officer of Taco Cabana. The only entrance to the restaurants will be from inside the H-E-B stores.

"We think H-E-B is the perfect fit for us," said Lloyd. "They're the most important player in our market, they're based in San Antonio like us and they have a great market awareness of their customers."

The Taco Cabana restaurants' format is "somewhere between quick serve and family-style" said Lloyd. The units serve popular Tex-Mex lunch and dinner items like fajitas, nachos, enchiladas and quesadillas, and in the morning serve such items as breakfast enchiladas. The H-E-B units will not serve beer and Margaritas as do the other Taco Cabanas.

The average customer check at Taco Cabana units totals between $5.50 and $5.75. System-wide, Taco Cabana units average about $1.3 million in business annually, said Lloyd, while San Antonio units perform better, ringing up about $1.7 million annually.

This is Taco Cabanas first experiment in sharing space with another retailer, Lloyd said. Restaurant executives will be examining how well supermarket customers, already loaded down with groceries, will be able to navigate the restaurants.

"We think we'll do a lot of takeout for these shoppers, and we're looking at how to best package takeout orders to make it easier for the customer to carry another bag," Lloyd said.

Restaurant officials will also be examining the development of customer demand during various day-parts, how much walk-up business is generated in the location (most Taco Cabanas generate 40% of their business through drive-up windows, which will not be included in these units) and how much breakfast business the test units ring up, he said.

Officials from H-E-B did not return calls seeking comment on the lease arrangement. H-E-B's vice president of public affairs and communications Mike De La Garza said in a press release, "Locating a Taco Cabana inside an H-E-B makes a lot of sense to us because it is viewed as adding another service of value to our customers. The greater convenience we give our customers, the better we serve them."

H-E-B operates more than 230 stores in Texas.

Whether both businesses prosper in this test arrangement depends on customer mix, said Ira Blumenthal, president of Co-Opportunities, an Atlanta-based consulting and marketing firm that works with food-service and supermarket industries.

"The key to success will be, as it always is, the consumer. If the demographics are right, it's the right way to go. I think it will be great for H-E-B and for Taco Cabana, but the demographic match is crucial."